Are SMEs struggling to repay Covid loans?

For businesses up and down the country, it has been an unprecedented time of challenge and change. Many SMEs have required Covid loans in order to stay afloat and continue trading now that we have entered a time of recovery. 

However, these loans still need to be repaid and there is evidence that this is proving to be challenging for a large number of SMEs. So, let’s look at how hard it is for many companies and what the potential options out there are.

 

TSF - Blog image - loan repaymentWhat percentage of companies is struggling?

A survey conducted by CityAM found that 59 percent of SMEs in the UK relied either on the furlough scheme or government loans – or a combination of the two. This number totals around 3.5 million companies all around the country. This same survey has shown that at least one-tenth of these companies is struggling to pay the loan back again due to the enormous impact on supply chains and cash flow that has taken place. Late payments on loan repayments have been a major issue for a large percentage of these SMEs.


What is the impact of this problem?

Now, we need to look closer at exactly what sort of impact this struggle has caused. In fact, around 40 percent of SMEs are now not able to invest in new technology or products in a way that would help with their growth. Around 18 percent of these businesses are going to have to make redundancies in order to keep their head above water, and 16 percent of them are not able to pay their current staff members. Obviously, all of this amounts to some major problems.

Founder of LawBite Clive Rich said: “The end of furlough and repayment of Covid loans is placing a significant strain on the cash flow of thousands of our SMEs. This is without even considering other challenges like Brexit, which also harms supply chains, cash flow and employment.”


What should SMEs do?

With many companies struggling as many government-backed schemes wind to a close, this means that SMEs have a choice to make about how they are going to respond to this particular problem. With trust and satisfaction levels in banks and traditional lenders at a low ebb, many companies are looking at the potential benefits of shifting over to a finance broker such as TSF.

First of all, using a finance broker can be beneficial as companies can get a more personalized level of support with packages that are designed to be tailored to their own individual needs and requirements. As well as companies that need help with repaying the loans that they have stacked up during the coronavirus pandemic, there are also those who are ready and waiting to take the next step in the life of their business, trying to invest their way into the future.

To begin with, it is worth speaking with one of the advisors at TSF to discuss the range of support options that are out there. They will be able to talk you through a few of the main options that you have at your disposal before settling on the one that is going to fit the individual SME needs the closest. Not only could this help to stave of redundancies, but it could also help companies to have a greater level of flexibility in plotting their own course and not worrying about how to make loan repayments from one day to the next. Ultimately, it is all about coming out of the other side of this pandemic in the right way.

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